Speaker 1: We're from Mahard.
Speaker 2: We're Innovation Money and Power Collie in Silicon Vallet NBN.
Speaker 2: This is Bloomberg Technology with Caroline Hyde and.
Speaker 3: Ed Ludlow live from San Francisco. This is Bloomberg Technology
Speaker 3: coming up. A global equity route intensifies with big tech
Speaker 3: at the forefront of the selloff, from Nvidio and TSMC to.
Speaker 4: Robinhood and Microsoft.
Speaker 3: We hone in on the names being hit hardest amid
Speaker 3: the carnage, and we'll have full coverage on Apple as
Speaker 3: Berkshire halfaway slashes its steak in the tech giant. But first,
Speaker 3: this is the picture in financial markets. It is an
Speaker 3: ugly day, but we're off session lows at the index level.
Speaker 3: It started in Asia, it went to the European session.
Speaker 3: Now in the United States, but looking at the S
Speaker 3: and P five five hundred, even a three percent decline
Speaker 3: puts US on track for its biggest drop since late September.
Speaker 3: Chip stocks particularly feeling the anxiety names like in Nvidia,
Speaker 3: but also TSMC's usadrs. You saw the yield on the
Speaker 3: US two year treasury fall below that of the ten year.
Speaker 3: Disinversion happen for the first time since July twenty twenty two.
Speaker 3: The crypto markets are also interesting. Show me Bitcoin and
Speaker 3: look at the severity of declines.
Speaker 4: Remember that in the.
Speaker 3: Crypto space, we're in an asset class that is trading
Speaker 3: twenty four to seven If we can please bring that up,
Speaker 3: because I want to move things forward. There's also particular
Speaker 3: anxiety right in those single names. You look at Bitcoin
Speaker 3: down eight point eight percent in a session twenty four
Speaker 3: to seven hour trading.
Speaker 4: Apple and and Vidia.
Speaker 3: Also off session lows, but in particular names that leading
Speaker 3: declines from a point perspective or a percentage change drag
Speaker 3: at the index level.
Speaker 4: Let's break it all down.
Speaker 3: We got Bloomberg crossset report at Isabel Lee and also
Speaker 3: our international Economics and Policy correspondent Michael McKee as well.
Speaker 4: I start with you. I think this started with economic
Speaker 4: data on Friday.
Speaker 3: Then you had new slow through the weekend, and now
Speaker 3: here we are through an Asia, Europe and the US
Speaker 3: session where things don't look very good.
Speaker 5: Exactly. It's sart. On a Friday, we had week jobs data,
Speaker 5: but it wasn't really horrible, so we saw a stock
Speaker 5: market under pressure. But over the weekend I was checking
Speaker 5: my phone because I was trying to figure out what
Speaker 5: is going wrong. And today we have New York to
Speaker 5: London to Tokyo equities are really getting pummeled s and
Speaker 5: P five hundred is on track for its worst routes
Speaker 5: in twenty twenty two, with ninety five percent of the
Speaker 5: stocks there in the red. And I read a note
Speaker 5: this morning that's saying, instead of asking what's going wrong,
Speaker 5: it's better to ask what didn't. We have a slew
Speaker 5: of reasons for that. We have, for instance, a great
Speaker 5: hip from Japan, a perceived failure by the said to
Speaker 5: cut rates. We have unemployment US employment figures. We have
Speaker 5: Warren Buffett selling Apple shares, and we had a Bloomberg
Speaker 5: storytelling traders Okay, maybe it's really not some cost for
Speaker 5: a panic, but of course we have some traders panicking.
Speaker 5: And last, but not the least, is the unwiding and
Speaker 5: the highly popular trade which is called popular yen, called
Speaker 5: carry trade. We're also seeing pressure in that. So that's
Speaker 5: a trade where you borrow yen investment in their high
Speaker 5: flying currencies. But really it's just really a slew of reasons,
Speaker 5: and I don't know where to start.
Speaker 3: Mike McKee, our policy and economics corresponding the Fed, or
Speaker 3: at least the market's expectations for the FED, are a
Speaker 3: big part of this story. The swaps market at one
Speaker 3: point pricing in a sixty percent six zero percent chance
Speaker 3: of an emergency rate cut this week.
Speaker 4: Explain that to me.
Speaker 6: I can't really explain it to you except for panic.
Speaker 6: It was in Asian markets where the volume is lower
Speaker 6: and people don't understand the FED. Perhaps as well. It's
Speaker 6: really come back now at the moment there's one week
Speaker 6: swaps are pricing in a five basis point move, not
Speaker 6: even a real rate cut. So at this point you
Speaker 6: can't really say that people think the FED is going
Speaker 6: to be getting involved. There's more of a wish being
Speaker 6: the father to the man situation here in the markets,
Speaker 6: always looking to the FED when something goes wrong.
Speaker 7: But there's some right with.
Speaker 6: What's happened today from an economic standpoint, in the sense
Speaker 6: that the ISM services number was good, and with yields falling,
Speaker 6: we're seeing mortgage rates falling. We're also seeing gasoline prices falling,
Speaker 6: and all those things could be stimulative to the economy.
Speaker 6: So the Fed's could to sit back and say you're
Speaker 6: losing money in your equity trade, because maybe you did
Speaker 6: the wrong trade, but it's not something we can fix.
Speaker 4: Is value.
Speaker 3: You sort of masterfully gave this global picture of what
Speaker 3: happened in equities markets, tying in the economic data. One
Speaker 3: of the questions I've been getting this morning on social
Speaker 3: media has been about Bitcoin.
Speaker 4: Loads of people saying, hold on.
Speaker 3: You kept telling us that bitcoin would behave like a
Speaker 3: haven asset in an environment like this. Bitcoin seems very
Speaker 3: much tied to the FED narrative and economic data as well,
Speaker 3: But that's the same.
Speaker 5: Bitcoin hasn't been really a haven. In fact, it's been
Speaker 5: more of a barometer of risk sentiment. And now we
Speaker 5: see Bitcoin and Easier and all the other art coins
Speaker 5: really edging lower in from me, what's interesting is the
Speaker 5: Bitcoin ETFs and the ether ETF because we've never really
Speaker 5: seen this economic climate with this product. I mean, a
Speaker 5: lot of people are comparing it to the Great Financial
Speaker 5: Crisis or other eras, but then we didn't have bitcoin
Speaker 5: ETFs then, so we're really going to keep track of
Speaker 5: the flows. I have a story from Across Asset team
Speaker 5: about how billions were still poured into tech ETFs, and
Speaker 5: of course now we see that they're under some pain,
Speaker 5: so it's also going to be interesting to see how
Speaker 5: bitcoin ets and ether ETFs trade in this really unfortunate
Speaker 5: or fortunate depending on who you ask.
Speaker 4: Pena'men on Mike.
Speaker 3: We always say on this program Bloomberg Technology that higher
Speaker 3: rates discount the present values of future cash flows. So,
Speaker 3: in other words, technology investors track what the FED will
Speaker 3: it won't do. I was listening to Bloomberg Surveillance earlier,
Speaker 3: and they're talking about this distinction between the fed's lesser
Speaker 3: focus on restrictive policy and a future moved to accommodative policy.
Speaker 3: What happens next. I know that's really impossible for you
Speaker 3: to answer, but go ahead.
Speaker 6: Yeah, that is a sort of impossible set up there,
Speaker 6: because the FED is going to want to wait as
Speaker 6: long as possible. They don't want to do anything emergency.
Speaker 6: They don't want to react to stock market ups and downs.
Speaker 6: As long as you can trade, they don't care which
Speaker 6: way the trade goes. But the data have to show
Speaker 6: the Fed that there is a significant shift in the
Speaker 6: economic outlook before they would consider doing something like a
Speaker 6: fifty basis point cutter moving much more closer to accommodative.
Speaker 6: They're still on track for twenty five in September because
Speaker 6: they think they need to normalize, they need.
Speaker 4: To get back to a closer to neutral rate.
Speaker 6: And I don't think that's going to change, at least
Speaker 6: in their minds unless we see some data start to
Speaker 6: come in really badly. And the first data we had
Speaker 6: out today, the ISM services numbers come in better than
Speaker 6: expected across the board, So their caution is going to
Speaker 6: be dependent on the data, and the data at this
Speaker 6: point are not telling them they need to do anything.
Speaker 3: Bloom Bags, Mike McKee and Isabel Lee, the best at
Speaker 3: bloom Bags Television, New York, thank you so much. Let's
Speaker 3: get more on the markets and bring in Angelocal cafas
Speaker 3: senior strategists at Edward Jones. And I'm always one for
Speaker 3: a data point. I'm thinking specifically about the Mag seven
Speaker 3: and we have this index or gauge at the Mag
Speaker 3: seven at one point in the session, it's biggest.
Speaker 4: Drop on record. Take everything that our.
Speaker 3: Team have just just said and apply it to what's
Speaker 3: happening with the biggest technology names.
Speaker 7: Sure.
Speaker 8: Hello, Clearly volatility didn't take the summer off. We saw
Speaker 8: the markets were led by the Magnificent seven and on
Speaker 8: the way lower, it's been the Magnificent seven that have
Speaker 8: been really the weak spot. I think the issue has
Speaker 8: been that of expectations. These companies continue to deliver outsize
Speaker 8: earnings growth, but the bar was very high heading into
Speaker 8: this quorder, and as a result we did see some disappointments.
Speaker 8: These were the names that have been trading at the
Speaker 8: highest pe ratios. So as we talking about the yen charactery,
Speaker 8: heads funds, many heads fans borrowing in yen to invest
Speaker 8: in other assets, and now with the yen appreciation, they're
Speaker 8: selling some of those assets, and no doubt some of
Speaker 8: these are the Magnificent seven stocks. So we have a
Speaker 8: combination of high bar, we have earnings broadening to other sectors.
Speaker 8: For example, this earning season, we have seen the biggest
Speaker 8: earning surprises coming from defensive sectors and also some of
Speaker 8: the cyclical ones and not the growth sectors that we
Speaker 8: have been used to over the last couple of earning seasons.
Speaker 3: But at the same time, the fundamentals have not seen
Speaker 3: so let exactly, so let me jump in.
Speaker 4: The fundamentals have not changed, is what you just said.
Speaker 3: We made a big deal of the gain in the
Speaker 3: S and P five hundred in the first half of
Speaker 3: this year, fourteen percent or so, largely coming from the
Speaker 3: Magnificent seven and in years where the S and P
Speaker 3: five hundred is gained double digits in one AH, it
Speaker 3: usually goes on to perform in two AH. How much
Speaker 3: of the departure is this session for that historic trend.
Speaker 8: Not that this is an abrupt and uncomfortable pullback. And
Speaker 8: I think there's two things going on. One is the
Speaker 8: technical picture, which if it is an over reaction that
Speaker 8: potentially move lower presents an opportunity for the remainder of
Speaker 8: the year. And then the second part we need to
Speaker 8: answer as investors is is there something fundamentally broken?
Speaker 7: Meaning are we heading towards the recession?
Speaker 8: Because part of a lot of that narrative has been
Speaker 8: around the growth scare, and I think for our clients' perspective,
Speaker 8: we need to first answer the latter. The US economy
Speaker 8: still continues to grow, let's call it trend or maybe
Speaker 8: slightly below trend. Looking at the GDP now estimate for
Speaker 8: Q three is still slightly north of two percent. We
Speaker 8: just got the ism services PMI that was well into
Speaker 8: expansion territory, and the em employment component very importantly provided
Speaker 8: some reason for optimism given the Friday jobs report that
Speaker 8: we get. We do not think that the US economy
Speaker 8: in a week's time is going to fall off bed
Speaker 8: We have seen still rising earnings, corporate profits, consumers, and
Speaker 8: corporate balances remain healthy. So I think it fits into
Speaker 8: the narrative of broadening in market leadership away necessarily from
Speaker 8: the overall potentially over extended peck.
Speaker 7: So we are still posed for the remainder of the year.
Speaker 8: But we don't think that the Magnificent seven are going
Speaker 8: to be once again the ones that everybody gravitates towards.
Speaker 4: Angelo.
Speaker 3: Chief of what among what you've just outlined is in video,
Speaker 3: we are way off session loads and video is down
Speaker 3: six percent, but one point in the session was down
Speaker 3: fifteen percent, which for a company that size is a
Speaker 3: big drop. There was a report from the Information that
Speaker 3: said Blackwell, the next generation AI accelerator with face delays
Speaker 3: due to a design issue.
Speaker 4: Over the weekend.
Speaker 3: In video got back to us and said that actually
Speaker 3: Hopper demand is strong, Blackwell sampling is started. They don't
Speaker 3: comment on rumors, et cetera. You just said that we'll
Speaker 3: move away from sort of the concentration of leadership, but
Speaker 3: we have to wait until the twenty eighth for this
Speaker 3: month to get in video earnings. That's quite a long
Speaker 3: period of time in which the markets could have some
Speaker 3: anxiety for what has been a leader in the direction
Speaker 3: of travel.
Speaker 4: What do you make of that?
Speaker 8: Yeah, the Nvida is the last of Magnificent seven to
Speaker 8: report earnings, and no doubt, it's not that everybody the
Speaker 8: whole world is watching the theme so far with everybody's
Speaker 8: excited about the artificial intelligence, but there has been some
Speaker 8: skepticism over the last couple of weeks and investors are
Speaker 8: getting increasingly impatient to see the heavy spending of AI
Speaker 8: translate into eternal profits. But what we have been hearing
Speaker 8: from the remainder Magnificent six of the seven that they
Speaker 8: have been spending, so that should continue to be a
Speaker 8: pail wind for Nvidia. And I think what we're all
Speaker 8: been with here is again the high bar of expectations
Speaker 8: when you have a stock that's been up so much
Speaker 8: over the last couple of years and so this year,
Speaker 8: even with the recent pullback, Naturally that creates tension points
Speaker 8: whenever news like we have been getting over the last
Speaker 8: couple of weeks emergence. But at the same time, again
Speaker 8: we still continue to be positive around artificial intelligence, not
Speaker 8: only for this year, but for the next five to
Speaker 8: ten years.
Speaker 7: And I think that that is important for investors to remember.
Speaker 3: Angel Local Cafe senior strategist Edward Jones, thank you. We
Speaker 3: said that this all started in the Asian session. The
Speaker 3: taie X saw its worst day in fifty seven years
Speaker 3: after TSMC shares plunged nine point eight percent, a record
Speaker 3: daily decline for the AI chip maker. TISMC accounts for
Speaker 3: more than thirty percent of the taie X, which closed
Speaker 3: down eight point four percent. It's worth sell off since
Speaker 3: nineteen sixty seven in the seas In Japan and South
Speaker 3: Korea also significantly in their Monday sessions. Coming up here
Speaker 3: on Bloomberg Technology, we're going to hone in on Apple
Speaker 3: as shares plunge and Berkshire slashes its steak in the
Speaker 3: iPhone maker. The stock down three point three percent, again
Speaker 3: of session lows, but a significant decline.
Speaker 4: This is Bloomberg Technology.
Speaker 9: I believe it to buy an opportunity for the high
Speaker 9: quality of large cab memes that we like.
Speaker 7: To buy in these types of periods.
Speaker 3: Dan I was of Webbush earlier saying it's an opportunity
Speaker 3: to buy the dip in big tech. I know he's
Speaker 3: not alone in calling for that this morning. Let's also
Speaker 3: take a look at shares of Apple. We are way
Speaker 3: off session lows, but at one point in the session
Speaker 3: we're down more than ten percent, which was a worrying
Speaker 3: way to start the US session on a Monday. Let's
Speaker 3: bring in Bloomberg's Mark German. One of the catalysts or
Speaker 3: newsflow items of the weekend was Berkshire halfway slashing at
Speaker 3: steak in Apple, largely to generate cash. But there's his
Speaker 3: story on the Bloombag about how Apple investors have been
Speaker 3: urged to keep calm in spite of what happened elsewhere.
Speaker 3: We just concerned about growth the Apple side of this story.
Speaker 4: Please, when you have declines.
Speaker 9: Of this magnitude, you mentioned the ten percent decline in
Speaker 9: the early hours of trading. Now it sounds to about
Speaker 9: a three percent decline. These are more macro related issues
Speaker 9: when you have those big swings in that volatility. Right,
Speaker 9: There's nothing that Apple necessarily did. There's no news item
Speaker 9: related to Apple's actions a product its earnings.
Speaker 1: From last week. A lot of this has to do
Speaker 1: with macro.
Speaker 9: Concerns, the situation currently going on in the Middle East,
Speaker 9: the uncertainty surrounding the election, people wanting to hold onto
Speaker 9: their cash. But of course, as you mentioned the Warren
Speaker 9: Buffett Berkshire Hathaway news from over the weekend compared to
Speaker 9: the beginning of twenty twenty four, as steak in Apple
Speaker 9: is now half.
Speaker 7: Of what it was.
Speaker 9: He still hasn't about an eighty four point two billion
Speaker 9: dollar steak, So a huge steak remaining in Apple. But
Speaker 9: when you get those headlines about Warren Buffett right telling
Speaker 9: that much Apple over the course of the last six
Speaker 9: to eight months, that could be concerning combined with some
Speaker 9: of the other concerns greater China, artificial intelligence growth, the
Speaker 9: performance of the iPhone moving forward, their guidance certainly all
Speaker 9: of that combined in addition to the macro factors.
Speaker 3: Bloomberg News reflected going into Apple's earnings that some of
Speaker 3: the run up in the stock over recent weeks and
Speaker 3: months had been really about faith that Apple Intelligence would deliver.
Speaker 3: You've written over the weekend after earnings that actually, with
Speaker 3: Apple Intelligence, there's a long way to go.
Speaker 4: What were your arguments, Yeah.
Speaker 9: Apple Intelligence obviously is going to be a big initiative
Speaker 9: for Apple moving forward.
Speaker 1: They're marketing this heavily on the earnings call.
Speaker 9: I didn't get an official count, but I'm sure Tim
Speaker 9: Cook mentioned it at least fifteen to twenty times. Nearly
Speaker 9: every analyst asked about it. That has been a big
Speaker 9: catalyst for stock growth. But I don't think the initial
Speaker 9: feature set or even the future set in totality is
Speaker 9: something that's going to drive iPhone upgrades for this cycle.
Speaker 9: I think it's something that's probably going to drive upgrades
Speaker 9: in future cycles. Now, I want to be clear, I
Speaker 9: don't think there's a connection between realizations about the performance
Speaker 9: of artificial intelligence and this Apple stock decline. If you
Speaker 9: look at the rest of the market, they're in decline
Speaker 9: as well, So I think it's largely about more macro
Speaker 9: factors than anything very specific.
Speaker 3: In particular Bloomberg's Mark German on All Things Apple, Thank you.
Speaker 4: Time for talking tech and first Up.
Speaker 3: TikTok is being sued by the US government for allegedly
Speaker 3: collecting data on children. In a suit filed on Friday,
Speaker 3: the Justice Department claims the app has allowed millions of
Speaker 3: kids under the age of thirteen to create accounts without
Speaker 3: their parents' knowledge or consent in violation of an online
Speaker 3: Privacy Act. TikTok previously reached a settlement in twenty nineteen
Speaker 3: with the FTC on concerns related to child privacy.
Speaker 4: Plus.
Speaker 3: Online trading platforms from robin Hood to Fidelity and Charles
Speaker 3: Schwab have been suffering outages amid a surge in volume
Speaker 3: during this market sell off. More than fourteen thousand users
Speaker 3: reported an outage at Schwab at nine to fifty am
Speaker 3: in New York. That's according to the website down Detector.
Speaker 3: The firm did not immediately respond to requests for comment,
Speaker 3: but a company account posted on the social site x
Speaker 3: that some clients may have difficulty logging to Schwab platforms
Speaker 3: and shares of in Video falling today amid the tech
Speaker 3: sell off. According to reports, the company's upcoming AI chips
Speaker 3: will be delayed by three months or more due to
Speaker 3: a design flow and in Video spokesperson responded to Bloomberg
Speaker 3: over the weekend, saying, as we stated before, Hopper demand
Speaker 3: is very strong. Broad Blackwell's sum has started and productions
Speaker 3: on track to ramp in two h Beyond that, we
Speaker 3: don't comment on rumors all right more on AI. Groc
Speaker 3: has raised six hundred and forty million dollars in a
Speaker 3: Series D funding round, bringing evaluation to two point eight
Speaker 3: billion dollars. The startup focuses on building fast AI inference
Speaker 3: technology to supply increasing demand delights, bringing Jonathan Ross, founder
Speaker 3: and CEO.
Speaker 4: Of GROCK for more.
Speaker 3: Just last week, we were speaking to Lisa sou the
Speaker 3: MDCO about the move from training to influence. It's a
Speaker 3: sizable chunk of change you managed to raise. I guess
Speaker 3: the best starting place what we use the cash for.
Speaker 10: So the first thing is that we're going to build
Speaker 10: out about one hundred and eight thousand of our LPU
Speaker 10: chips or language processing units. To put that in perspective,
Speaker 10: you mentioned Hopper the Nvidia GPU. Last year they shipped
Speaker 10: about five hundred thousand, so this would be about twenty
Speaker 10: percent of what they shipped last year. Secondly, we intend
Speaker 10: to hire significantly. We're building out a lot of features.
Speaker 10: We actually offer a token as a service business where
Speaker 10: people can just use our hardware without having to buy it.
Speaker 10: And then we are looking at some acquisitions going forward
Speaker 10: as well.
Speaker 3: Strategically, when did GROC sort of say okay, inference needs
Speaker 3: to be our focus and how is it helping you
Speaker 3: get sort of get ahead that There's lots been discussed
Speaker 3: on this program about the many startups and companies working
Speaker 3: on training large language models from many hundreds of billions
Speaker 3: of parameters to smaller models. You have a more narrow focus, Jonathan.
Speaker 7: Yeah.
Speaker 10: So Grok from the beginning is focused on inference. And
Speaker 10: the reason is training at this point is a well
Speaker 10: solved problem and we always knew that it would be
Speaker 10: my background. I actually started the Google TPU chip and
Speaker 10: we actually started with inference there because we're actually able
Speaker 10: to train the models, we just couldn't afford to put
Speaker 10: them in production. Typically, whatever you spend on training, you
Speaker 10: will continue to spend going forward, but you're going to
Speaker 10: spend ten to twenty times that much putting it into production.
Speaker 10: You spend money to make the models, you make your
Speaker 10: money with inference. It's also a scale game, and so
Speaker 10: we've been focused on this since day one.
Speaker 3: There's also sort of a relationship and talent conversation to
Speaker 3: be had. Yan lquern Over at Meta is going to
Speaker 3: be your new technical advisor, which was in the news
Speaker 3: as well.
Speaker 4: Why is that important to you?
Speaker 10: So, Yan lacun is a legendary in this industry. He
Speaker 10: won the Turing Award for being one of the three
Speaker 10: people who invented the algorithms that make modern AI work.
Speaker 10: And of course Yan Lacun is very centrally positioned in
Speaker 10: terms of AI. He's also pushing very heavily for open
Speaker 10: source models or open weights models, and this is something
Speaker 10: that's important for the industry. GROC actually wouldn't exist today
Speaker 10: if it wasn't for open source models. We'd actually built
Speaker 10: the world's best chips, but if we didn't also have
Speaker 10: the software to run on it, we wouldn't be able
Speaker 10: to demonstrate that. And so the LAMA models for meta
Speaker 10: effectively are the Linux of the generative age, and it's
Speaker 10: enabling people to get into the AI business without having
Speaker 10: to train the models themselves.
Speaker 3: Jonathan Ross, founder and CEO of GROC, Welcome back to
Speaker 3: Bloomberg Technology, Ed Ludlow in San Francisco. I go straight
Speaker 3: to the Nasdaq one hundred, So we're off session lows,
Speaker 3: down two point three percent or so in this session,
Speaker 3: but we remind ourselves something that we talked about on Friday.
Speaker 3: The Nasdaq one hundred closed Friday with four straight weeks
Speaker 3: of declines, So what's happening right now in the moment.
Speaker 3: There is anxiety in global financial markets, but it's kind
Speaker 3: of been happening over a longer period of time in
Speaker 3: terms of the downward pressure on technology stocks, in particular
Speaker 3: in terms of single names and specific asset classes. Nvidia
Speaker 3: is under pressure, but off session lows. Apple actually is
Speaker 3: now down four percent and its declines are starting to accelerate,
Speaker 3: but nowhere near the near eleven percent drop at the open.
Speaker 3: Then Bitcoin well fifty four thousand US dollars per token
Speaker 3: trading twenty four to seven, but was down eight percent
Speaker 3: in the current US session.
Speaker 4: There's a lot to discuss. Delights.
Speaker 3: Bring in my friend Bluembo Shnali Bassak. I mean, you
Speaker 3: had two hours on open interest, right and I think
Speaker 3: that you probably discuss all manner of things, the basics
Speaker 3: being a move into the bomb markets, the safety of them,
Speaker 3: bitcoins not behaving like a haven asset, and equacy investors
Speaker 3: are either very worried or completely sanguine. Reflects on some
Speaker 3: of the conversations that you've.
Speaker 11: Had a few things to the point that you're making here,
Speaker 11: you're looking at the third day of declines in the
Speaker 11: s and P five hundred, and then the Nazak one hundred.
Speaker 11: It is the third day of declines of more than
Speaker 11: two percent. Friday, you saw the Nazaq one hundred really
Speaker 11: flirt with that correction territory. Then over the weekend into today,
Speaker 11: you saw the Asian trade just really really sell through
Speaker 11: the ground here. You saw really historic really moves there
Speaker 11: in Japanese equities for example.
Speaker 4: And what you.
Speaker 11: Saw was an unwinding of a globe carry trade. This
Speaker 11: is what investors are borrowing under a cheap currency and
Speaker 11: really plowing those assets now into higher yielding US assets,
Speaker 11: particularly stocks in this instance, which is why you're seeing
Speaker 11: that unwind. Now, the major question is how far does
Speaker 11: that unwind really go? On top of that, there's very
Speaker 11: few places to hide. To your point, Bitcoin today now
Speaker 11: flirting with about fifty five thousand, had fallen below fifty thousand.
Speaker 4: You saw gold.
Speaker 11: Dropping this morning, oil dropping as well. You saw a
Speaker 11: lot of risk off attitudes across the board and in
Speaker 11: the bond market as well, until you saw that ism
Speaker 11: data hit and give a little bit of a sigh
Speaker 11: of relief. You are now watching a bond market a
Speaker 11: to your yield essentially about flat on the day, so
Speaker 11: that severe bid in the bond market starting to take
Speaker 11: its foot off of the pedal here, and stocks taking
Speaker 11: a little bit of a breather along with it. Still
Speaker 11: down on the day, but not as severely as we
Speaker 11: started the day lower. Those small cap equities also taking
Speaker 11: a major hit today as well. Remember recently a lot
Speaker 11: of traders plowing into that Russell two thousand rotation really
Speaker 11: feeling the pain, so underneath the surface, a lot of pain.
Speaker 11: I will also say takes a couple of days to
Speaker 11: see those margin calls also start to come through. Big
Speaker 11: question here about whether there is more pain once you
Speaker 11: see those calls start to come through the market.
Speaker 3: Starting Monday with a discussion about margin calls. Happy Monday
Speaker 3: to you, Bluebooks, Snali Vassek, thank you. Let's get the investors' perspective.
Speaker 3: Nancy Tegler of Laffatengler Investments here to talk markets and
Speaker 3: with respect. You've been in and around the market so
Speaker 3: a lot longer than I But I just want to
Speaker 3: go back to the point I made in my market
Speaker 3: check that the NAZ that one hundred had had four straight.
Speaker 4: Weeks of declines.
Speaker 3: Bitcoin traded lower through the weekend over multiple days when
Speaker 3: you wake up to daylight today, is it anxiety or
Speaker 3: is it well, we should have seen this coming a
Speaker 3: little bit.
Speaker 12: Well, yes, thanks for having me ED. I think we
Speaker 12: kind of did see it coming. As earning started. The
Speaker 12: penalty that Alphabet received for CAPEC spending and just somewhat
Speaker 12: weaker margins in the next quarter seemed outsized to me.
Speaker 12: And that's often what happens when valuations get a little
Speaker 12: bit lofty, and then every bit of news, every bit
Speaker 12: of headline news, drives the market because thealgoes are reading
Speaker 12: the headlines, the hedge funds are trading off of the headlines,
Speaker 12: and so you get these big, outsized moves. If you
Speaker 12: put it in the perspective of the forty plus years
Speaker 12: I've been doing it historically, this has been a time
Speaker 12: when you've wanted to step back, not jump in too quickly,
Speaker 12: but build a list of names that you want to own.
Speaker 12: And then as the market sort of settle in the
Speaker 12: VIX comes down a little bit, then I think this
Speaker 12: is once again an opportunity. The last thing I'll say
Speaker 12: about this ED is that the one economic number that
Speaker 12: has been little discussed and gone unnoticed was the improvement
Speaker 12: in productivity too, was came in much harder than expected,
Speaker 12: up two point three percent. The previous quarter was revised
Speaker 12: up also, and I think productivity is going to be
Speaker 12: the key, the magic bullet, whatever you want to call it,
Speaker 12: for continued economic growth in a lower inflationary environment.
Speaker 3: Take what you just said about productivity then, and I
Speaker 3: post a question of what should the market do with that?
Speaker 3: You know, Mike McKee was on the show earlier trying
Speaker 3: his best to explain why the swats market with price
Speaker 3: a sixty percent chance of the Fed doing an emergency
Speaker 3: rate cut this week, and that seems more tied to
Speaker 3: the equities market rather than warding off a recession or not.
Speaker 4: I'm just trying.
Speaker 3: To tie macro and monetary policy with the market's behavior
Speaker 3: right now.
Speaker 12: Well, yeah, and if you had been well, you certainly
Speaker 12: know about the bond vigilandies. But that's what this feels
Speaker 12: like to me. It's the market having temper tantrum because
Speaker 12: they think the Fed is waited too long. They probably
Speaker 12: have waited too long. They've been behind the curve, so
Speaker 12: to speak, all the way through this process. And this
Speaker 12: notion of being data dependent in a world where you
Speaker 12: need to be looking forward and where they're four hundred
Speaker 12: plus PhD economists are forecasting models. They have made, in
Speaker 12: my estimation, an enormous policy error. But that said, stocks
Speaker 12: ultimately should trade off of earnings. I think we get
Speaker 12: a cut. I don't think we get an emergency cut,
Speaker 12: as the market would like. And I actually think that
Speaker 12: would be bad because when you look at the economic numbers,
Speaker 12: the economy is just fine. I mean, the jobs numbers
Speaker 12: are revised dramatically every month, and so I think you
Speaker 12: have to step away from that and say, you know,
Speaker 12: was that an aberration on Friday? Is I mean, we
Speaker 12: know the job market is softening, but is it collapsing?
Speaker 12: I don't think so. And so I think this is
Speaker 12: an opportunity for long term investors once the dust settles,
Speaker 12: because there there'll probably be a few more runs to
Speaker 12: the downside. And then I think you step in and
Speaker 12: you add to high quality memes.
Speaker 3: Nancy in Video reports its earnings after market on August
Speaker 3: twenty eight. How uncomfortable are the next three weeks going
Speaker 3: to be?
Speaker 12: I think they're going to be uncomfortable ed. I think that,
Speaker 12: and remember we've seen this every year twenty twenty two,
Speaker 12: twenty twenty three. We were told in the summer and
Speaker 12: the summer swoon that the tech trade was over, but
Speaker 12: remember the CAPEC spend that Alphabet and Amazon and Microsoft
Speaker 12: have been punished for is someone else's revenues, and so
Speaker 12: I think in vidious likely to surprise to the upside
Speaker 12: we heard from Lisa Sue. I heard you mentioned her earlier.
Speaker 12: That's a name where we've been adding. I think it's
Speaker 12: going to be a catalyst for some outperformance and stabilization.
Speaker 3: If you're able to please, can we look a hot
Speaker 3: head to the second half of the year. We talked
Speaker 3: a lot about how in years where the S and
Speaker 3: P five hundred registered is a double digit percentage gain
Speaker 3: in one age, it often performs well in the second
Speaker 3: half of the year. I think the NAZA one hundred
Speaker 3: has similar precedents or history. Is that your expectation of
Speaker 3: what's to come?
Speaker 12: Yeah, Well, based on what I've heard from the companies
Speaker 12: from an earning standpoint, you're hearing and most of us
Speaker 12: are hearing, that it's not been a good reporting season
Speaker 12: so far, but there have been very meaningful bright spots,
Speaker 12: Companies raising guidance, companies expanding margins. So I think that
Speaker 12: you have to again, as always, you've got to let
Speaker 12: the markets work through this stuff. But the second half,
Speaker 12: based on what we've seen at the company level, should
Speaker 12: be better and up in our view, and seasonality is
Speaker 12: in our favorites and election year that doesn't always work,
Speaker 12: but we do think we'll certainly be higher by the
Speaker 12: end of the year and even into twenty twenty five.
Speaker 12: If the tech trade is over, people need to be
Speaker 12: much more worried about the rest to the market because
Speaker 12: technology is embedded in every aspect of many companies day
Speaker 12: to day and their future earnings and margin growth.
Speaker 3: That is the argument that Bloomberg Intelligence is Gina Martin
Speaker 3: Adams literally wrote this morning. We're going to talk about
Speaker 3: it with her later in the show. Nancy Tengler, CEO
Speaker 3: and CEO of Lappetengler Investments, thank you very much. Now
Speaker 3: coming up on the program, we're going to be joined
Speaker 3: by Matt Wieiler from Wellington Private Investments for his take
Speaker 3: on private markets late stage investing.
Speaker 4: But there are.
Speaker 3: Always parallels with what's going on around the world, even
Speaker 3: with public markets and public acquities. I'm really looking forward
Speaker 3: to this one that's next. This is Bloomberg Technology right
Speaker 3: back to financial markets and megacap tech. We're going to
Speaker 3: look at the Bloomberg Index, which tracks the Magnificent Magnificent seven.
Speaker 3: These are the biggest megacap technology companies. At one point
Speaker 3: in the session, the biggest drop on record. We've paired
Speaker 3: that that's kind of the story of the session so far,
Speaker 3: down three point four three point five percent on the
Speaker 3: mag seven. We've outlined all the concerns so far. Part
Speaker 3: of it is the worry about growth, and we can
Speaker 3: wait until Video's earnings on August twenty eighth to carry
Speaker 3: on that conversation about growth, particularly in the context of
Speaker 3: investment in AI infrastructure. But there are lots of parallels
Speaker 3: between public markets and also private markets as well. Let's
Speaker 3: talk about the investment landscape when it comes to late
Speaker 3: stage private tech companies, also IPO tech activity. I suppose
Speaker 3: with Matt with Hyler, consumer and Technology lead for Wellington
Speaker 3: Private Investments, also joined by my friend Hemma Palmer of
Speaker 3: Bloomberg News.
Speaker 4: Good morning to you, Matt.
Speaker 3: When you wake up to a daylight today, you're largely
Speaker 3: focused on growth.
Speaker 4: Stage venture investments.
Speaker 3: There are different factors you're tracking, But how do you react?
Speaker 4: How does it make you approach your day to day work.
Speaker 2: The short answer is is that on a day to
Speaker 2: day basis, the fluctuations in volatility in the public market
Speaker 2: don't really impact the late stage private market where we focus.
Speaker 2: There's obviously implications if this persists when it comes to
Speaker 2: exit opportunity with the respect to IPOs and valuation concerns,
Speaker 2: but the day to day volatility doesn't really impact the
Speaker 2: late stage private market unless it sustains.
Speaker 13: And when you look at AI, you know, some of
Speaker 13: the a good portion of the pain we're seeing right
Speaker 13: now is in the AI stock space. Does that inform
Speaker 13: how you look at AI investing when it comes to
Speaker 13: late stage growth investing in artificial intelligence?
Speaker 2: Again, I wouldn't characterize the public markets as having a
Speaker 2: huge implication in the short term on the late stage
Speaker 2: private market, but I would say, you know, with respect
Speaker 2: to AI, you kind of have to think about and
Speaker 2: address us question number one is is AI a transformational
Speaker 2: shift in technology platforms?
Speaker 1: You kind of have to answer that.
Speaker 2: And then the second question I think you have to
Speaker 2: answer is kind of where are you with respect to
Speaker 2: AI based transformation or AI lead transformation? And I think
Speaker 2: those are the two questions you have to answer as
Speaker 2: a late safe private investor to think about where you
Speaker 2: should be deploying, if at all, and what the landscape
Speaker 2: looks like not over the next month or two or quarter,
Speaker 2: but over the next multi day.
Speaker 13: So as you look to invest the seven point five
Speaker 13: billion that you oversee in private markets, where is the
Speaker 13: biggest opportunity for you right now?
Speaker 2: I mean, I think I couldn't be on the show
Speaker 2: and be talking to both of you about talking about
Speaker 2: AI and AI lead disruption when you think about fundamental
Speaker 2: transformational shifts in technology. We believe that AI is a
Speaker 2: disruptive technology that will be a generational shift and how
Speaker 2: technology is ultimately deployed and adopted by enterprises. But then
Speaker 2: to the second question around how are we or how
Speaker 2: far along are we in that transformation?
Speaker 1: I think we're very early.
Speaker 2: And so when we think about opportunity set and we
Speaker 2: think about AI, we're long term, very.
Speaker 1: Bullish on the opportunity.
Speaker 2: You think shorter term and think about where we are
Speaker 2: within the inning the game of AI, and given how
Speaker 2: early we are, I think one of the questions that
Speaker 2: we end up asking ourselves with respect to AI is
Speaker 2: will today's winners be the winners that persist over a
Speaker 2: long time, and I think when you look historically at
Speaker 2: tech led disruption, when it comes to generational shifts like
Speaker 2: the Internet, like cloud, like mobile, the early winners oftentimes
Speaker 2: are not the long term winners who end up creating
Speaker 2: multi billion dollar public companies.
Speaker 3: Matt, you said that term or daily volatility doesn't really
Speaker 3: impact thinking in the hearing now, but it does impact
Speaker 3: sentiment towards markets, and therefore we need to ask about IPOs.
Speaker 3: You know, where do you see the remainder of this
Speaker 3: year with some of the late stage companies that are
Speaker 3: waiting in the wings to go public.
Speaker 2: I mean, I think, as you've talked about through the show, ed,
Speaker 2: the landscape has changed pretty dramatically over the past two days,
Speaker 2: two trading days, and absent those two trading days, I
Speaker 2: would have said that the IPO market is probably on
Speaker 2: the rebound, likely to start accelerating through the back half
Speaker 2: of this year and early next year. And given the noise,
Speaker 2: the volatility we're seeing today, will it cause the company
Speaker 2: that maybe's on the margin thinking should I go public
Speaker 2: or not to reassess and maybe delay until early next year?
Speaker 1: Most likely?
Speaker 2: That being said, if you go back, not over the
Speaker 2: last five.
Speaker 1: Or ten years of IPO data.
Speaker 2: But if you look back at the last fifty years
Speaker 2: of IPO activity levels, generally.
Speaker 1: The IPO window in other words, the.
Speaker 2: Amount of IPOs coming out tends to be dramatically below
Speaker 2: the norm or the mean for one to three years.
Speaker 2: And if you think about where we sit today, were
Speaker 2: kind of in the middle.
Speaker 1: Of year three, the first quarter of Q.
Speaker 2: Three of IPO activity being meaningfully down compared to historic periods,
Speaker 2: and so based on that, I would guess that we
Speaker 2: maybe have anywhere between zero in twelve more months before
Speaker 2: we do see a rebounded IPO activity, and.
Speaker 1: We're starting to see a little bit of it today.
Speaker 2: If you look back last year, we had three tech
Speaker 2: led IPOs go public last year. This year you're to
Speaker 2: date we've had five, so already at an accelerated pace.
Speaker 2: Will we take a pause given what's going on today?
Speaker 3: Potenti Matt with Eiler Consumers, technology lead for Wellington Private
Speaker 3: Investments and Bloomberg's Hemmapalma. Just very dynamic and timely conversation.
Speaker 4: Thank you. Back to markets.
Speaker 3: Let's bring in Gena Martin Adams of Bloomberg Intelligence and
Speaker 3: Gina are going straight to your bio on the Bloomberg
Speaker 3: terminal this morning. I'll summarize, but you're basically saying, look
Speaker 3: at earnings in aggregate on the S and P five
Speaker 3: hundred and stop blaming earnings, Blame something else.
Speaker 4: Who are you holding responsible for what's happening?
Speaker 14: Gina, Yeah, I think that really if we look at
Speaker 14: the sequence of how the market is melted down over
Speaker 14: the last couple of weeks, it's been predominantly about tech
Speaker 14: and kind of a loss of faith and tech. Now,
Speaker 14: I think it's important to consider where we've been as
Speaker 14: well when you look at the broad markets. We wrote
Speaker 14: a couple of notes last week that I think you're
Speaker 14: pretty telling.
Speaker 4: The first is we.
Speaker 14: Identify three and forty four reasons why tech faced in
Speaker 14: possible expectations. Those reasons are basis points and valuation multiples
Speaker 14: four thousand basis points above long term average or five
Speaker 14: year average. On the multiple would suggest that expectations for
Speaker 14: tech companies were extremely high coming into the last week. Yeah,
Speaker 14: a couple of key headline misses, but for the most part,
Speaker 14: tech companies actually satisfied second quarter expectations. It was about
Speaker 14: their guidance and this is the trigger that the market
Speaker 14: really played on. Then you piled on top of that
Speaker 14: some key macro indicators in the ism and the employment
Speaker 14: numbers that weren't as strong as many had hoped for,
Speaker 14: and you have a full meltdown on your hands. But
Speaker 14: this is really at the foot of tech, and investors'
Speaker 14: expectations that tech was of tech were just far too
Speaker 14: high coming into this earning season. We're now normalizing those expectations,
Speaker 14: and that's creating a bit of panic in the market.
Speaker 3: Investors' expectations are interesting. I mean, I think about Microsoft,
Speaker 3: for example, is just one case study where they missed
Speaker 3: estimates on cloud growth by a percentage point but still
Speaker 3: registered twenty nine two nine percent top line growth in
Speaker 3: the most critical unit. Is it just sort of idiosyncratic
Speaker 3: or is this broad based anxiety from investors that something
Speaker 3: will give way on the growth narrative overall?
Speaker 14: Yeah, I think it's a great question, and it's really
Speaker 14: difficult to tell so far. But what I can say
Speaker 14: is over the last week, what we have seen is
Speaker 14: just severe punishment of any tiny nuance, as you correctly
Speaker 14: highlight with Microsoft, very very strong aggregate growth, but a
Speaker 14: tiny nuanced miss was enough to really create a lot
Speaker 14: of uncertainty around that story. You see a lot of
Speaker 14: the same emerged with Amazon, similar sort of reactions even
Speaker 14: to Alphabet, So across the tech and tech adjacent space,
Speaker 14: we saw very similar reaction functions emerge. And that is
Speaker 14: I think investors just got ahead of them to their skates.
Speaker 14: They were expecting tech not only to beat, but to
Speaker 14: raise expectations beat almost perfectly. That was embedded in valuations,
Speaker 14: and now we're normalizing that.
Speaker 4: Now.
Speaker 14: This is tough because at this point in time, it
Speaker 14: was impossible for tech to keep creating stronger and stronger
Speaker 14: momentum earnings. We're now getting to the point where third quarter,
Speaker 14: second quarter, third quarter earnings of this year are facing
Speaker 14: incredibly tough comps. So tech earnings, even in the best
Speaker 14: of circumstance stances, are going to show decelerating growth rates
Speaker 14: over the second half of this year for the first
Speaker 14: time in quite some time. They were the only story
Speaker 14: of accelerating growth in the market in twenty twenty three
Speaker 14: and early twenty twenty four. Now they're showing some decelerating
Speaker 14: and growth. Well, the rest of the S and P
Speaker 14: five hundred is actually showing the growth acceleration, But we're
Speaker 14: kind of ignoring that because tech has been so key
Speaker 14: to the market performance so far this year.
Speaker 3: Well, you can also sort of pick and choose your
Speaker 3: data point, right, So in the first half of this year,
Speaker 3: the S and P five hundred rows fourteen percent, largely
Speaker 3: attributable to the mag seven.
Speaker 12: Right.
Speaker 3: But the other data point is that in years where
Speaker 3: the S and P five hundred has registered double digit
Speaker 3: gain in one h it usually does quite well in
Speaker 3: the full year or the second half of the year.
Speaker 3: So which one do you put emphasis on? The index
Speaker 3: or the names that drove the gains?
Speaker 14: Initially, I think it's a combination of both. I hate
Speaker 14: to wiggle around your question with them awfully answer, and
Speaker 14: I do think it is a combination of both, because
Speaker 14: if tech continues to sell off, if we still have
Speaker 14: weakness in tech, it's almost impossible for the index to
Speaker 14: overcome that. But the tech seloff is really about right
Speaker 14: sizing expectations and the rest of the index is producing growth.
Speaker 14: This is one major nuance when we compare twenty twenty
Speaker 14: four to twenty twenty three that I think is important
Speaker 14: to acknowledge. When tech sold off in the third quarter
Speaker 14: of twenty twenty three, remember we had a ten percent
Speaker 14: correction last time this year as well, but when Tech
Speaker 14: sold off in that instance, it was basically a one
Speaker 14: for one. As Tech sold off, the S and P
Speaker 14: five hundred sold off just as much. This time, the
Speaker 14: S and P five hundred is down just more than
Speaker 14: half or just about half as much as Tech. Okay,
Speaker 14: because you have some natural stabilizers that have emerged in
Speaker 14: twenty twenty four, with that our news recovery that is
Speaker 14: emerging in the rest of the index, does that sustain itself?
Speaker 14: Can it gather a little bit of momentum and a
Speaker 14: little bit of attention is a really key question we
Speaker 14: should be asking right now.
Speaker 3: Yes, Tina Martin Adams of Bloomberg Intelligence, thank you so
Speaker 3: much this Monday. That does it for this edition of
Speaker 3: Bloomberg Technology. Don't forget to recap all the conversations had
Speaker 3: today on the podcast. They were dynamic and there is
Speaker 3: a lot going on your where to find it on
Speaker 3: the terminal, the Bloomberg platforms, as well as on Apple, Spotify,
Speaker 3: and iHeart from San Francisco.
Speaker 4: This is Bloomberg Technology.